Educational Articles

Option Screen: Searching for “Diamonds in the Rough” - March 31, 2011

Lawrence D. Cavanagh
| March 31, 2011

Often a stock upgrade from “below average” to “average” can pinpoint an investment opportunity that might otherwise be missed. This week, we search for new stock upgrades to find underpriced calls that are attractively priced. Our screening came up with calls on eight different companies, including Advanced Battery Tech. (ABAT) and Capstead Mortgage Corp (CMO).

Company

Ticker

Stock Price

Bid

Fair Value

Months to Expiration

Current Leverage

Advanced Battery Tech

ABAT

2.04

0.15

0.65

1/2

6 1/2

Ariad Pharmaceuticals

ARIA

7.70

1.00

1.16

1 2/3

6 4/5

Capstead Mortage Corp

CMO

12.79

0.85

1.05

4 2/3

14

Commercial Vehicle Group

CVGI

18.61

0.85

1.28

1 2/3

12 2/7

Sturm Ruger and Co

RGR

22.98

0.90

1.42

3 1/2

13 1/2

Advanced Battery Technologies, Inc., through its subsidiaries, engages in the design, manufacture, and marketing of rechargeable polymer lithium-ion (PLI) batteries in the United States, Europe, and Asia. PLI batteries produce a relatively high average of 3.8 volts per cell, which makes them attractive in terms of both weight and volume. Additionally, they can be manufactured in very thin configurations and with large footprints. PLI cells can be configured in almost any prismatic shape, and can be made thinner than 0.0195 inches (0.5 mm) to fill virtually any shape efficiently. This combination of power and versatility makes rechargeable PLI batteries particularly attractive for use in consumer products such as portable computers, personal digital assistants (PDAs), and cellular telephones. www.abat.com.cn

Pharmaceuticals, Inc. (ARIA) provides medicines to treat cancer in the US, Europe, and Japan. Its lead cancer product, ridaforolimus, is being studied in multiple clinical trials in patients with various types of cancers, including sarcomas, breast cancer, prostate cancer, non-small cell lung cancer, and endometrial cancer. The company is also developing ponatinib, in Phase I clinical trial for chronic myeloid leukemia, acute myeloid leukemia, and other hematologic cancers; and AP26113 in the preclinical stage for various cancers. www.ariad.com

Capstead Mortgage Corporation operates as a mortgage conduit which purchases and securitizes various types of single-family residential mortgage loans. In addition, the Company has formed a mortgage servicing unit to function as the primary mortgage servicer and master servicer for loans and servicing rights acquired by the Company. The Company offers investors the opportunity to participate in the income generated from servicing and investing in mortgage loans, securitization activities and other portfolio strategies. www.capstead.com

Commercial Vehicle Group, Inc. (CVGI) designs and manufactures integrated system solutions for the commercial vehicle market. Its products include seats and seating systems, including air suspension seats, static seats, bus seats, and rail car seats for heavy trucks, and for commercial vehicles used in the construction and agricultural industries. The company also provides static and suspension seat systems, interior trim systems (including instrument panels, door panels, headliners, cabinetry and floor systems), cab structures and components, mirrors, wiper systems, electronic wire harness assemblies, and controls and switches specifically designed for applications in commercial vehicles. Its principal customers in North America include International, PACCAR, Caterpillar, Daimler Trucks, and Volvo/Mack. www.cvgrp.com

Sturm, Ruger & Company, Inc. (RGR) engages in the design, manufacture, and sale of firearms in the United States. The company offers its products under the "Ruger" name in four product categories, including single-shot, auto-loading, bolt-action, and modern sporting rifles; over and under shotguns; rim-fire auto-loading and center-fire auto-loading pistols; and single-action and double-action revolvers. It also manufactures and sells accessories and replacement parts for its firearms. www.ruger-firearms.com

At the time of this writing, the writer had no positions in any of the stocks mentioned in this report.